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As employers consider whether or not to drop their health plan in 2015, a broad, comprehensive financial impact analysis is required.

In addition to calculating the cost of the “No Coverage” Shared Responsibility penalty, employers must factor in the nondeductibility of the penalty, increases in cash compensation, and possible reductions in productivity. This article provides a brief overview of these components and explains how to run the math.

$2,000 “No Coverage” Shared Responsibility Penalty

Generally, the “no coverage” penalty could be assessed if minimum essential coverage (MEC) is not offered to at least 95 percent of the em­ployer’s employees working 30 or more hours per week.

For the 2015 plan year only, employers employing between 50 and 99 employees are exempt from the risk of penalty as long as certain conditions are met. For employers employing 100 or more employees, 95 percent is replaced with 70 percent.

If a penalty is assessed and assuming it applies for the entire year, it is calculated by multiplying the number of full-time employees less 80 for 2015 and less 30 thereafter by $2,000. Importantly, the “inadequate or unaffordable” shared responsibility penalty may still be imposed if a full-time employee qualifies for premium assistance when purchasing coverage through the marketplace.

Cash compensation considerations

Your current contribution towards the cost of your group health plan is part of your employees’ total compensation package. As such, the question of whether or not an employer should continue to provide health benefits cannot be considered in isolation.